It Pays to Know the Intricacies of Nursing Home Medicaid Program

By WESLEY E. WRlGHT
Special to 50 Plus
(originally published in the Houston Chronicle 50 Plus Section, Friday, January 29, 1999)

The United States Supreme Court has commented that Medicaid laws are the most complicated laws that have ever been promulgated by Congress with the exception of the Internal Revenue Code.

Achieving Medicaid eligibility can challenge even attorneys who practice in this area every day. But for those willing to preserve and obtain the proper guidance of a knowledgeable attorney, the rewards can be great.

The average cost of nursing homes in Harris County is around $3,500 per month for the base fee, not including prescriptions and extras. That amounts to $42,000 per year. At that rate it does not take long to exhaust a person's life savings. Medicaid is a long-term care assistance program for the financially needy. If certain eligibility criteria are met, then Medicaid virtually absorbs the entire cost of nursing home care.

Eligibility
To obtain nursing home Medicaid benefits, a person must be at least 65 years of age, blind or disabled and have the medical necessity to be in a nursing home. In Medicaid terminology, the spouse going into the nursing home is called the "institutionalized spouse" and the spouse staying at home is called the "community spouse."

When the institutionalized spouse goes into the nursing home, the institutionalized spouse is limited to assets in the amount of $2,000 and income in the amount of $1635 per month in order to qualify for Medicaid.

The regulations pursuant to Medicaid become so complicated thereafter that the typical lay person is unable to determine what to do. Most people think their only option is to spend down their assets to obtain Medicaid.

However, if these same people were to avail themselves of counsel from attorneys who work in this area they would find that it may be possible to save tens of thousands of dollars by having their case carefully guided through the Medicaid system.

People frequently are left with the impression that they must spend down their assets on nursing home bills at private pay rates in order to become eligible for Medicaid.

Although the basic rules allow a community spouse to protect a certain amount of countable resources, this is, in many cases, a fraction of what could have been preserved for the community spouse or the family if proper procedures are followed.

A knowledgeable attorney frequently can have the protected resource amount for the community spouse increased to a level that would be far above what the lay person would obtain, simply because the lay person does not know the rules and how to protect his or her rights.

Additionally, people finding themselves in a situation where a family member is going into the nursing home are sometimes led to believe that the purchase of an annuity is the best or even the only way out.

This is rarely the case. In fact, the use of annuities in Medicaid estate planning is useful in only a very small percentage of cases. Usually, the case can be handled in a way that is more advantageous.

An annuity, when purchased, leaves a person locked into what is usually a low-yielding investment vehicle, with the remainder going to Medicaid to the extent that Medicaid benefits were advanced on behalf of the Medicaid beneficiary with only a few exceptions.

The Miller Trust
Another problem that frequently comes up is a result of Texas being an income-cap state prohibiting Medicaid benefits from going to an individual who has direct income that exceeds $1,635 per month.

However, this problem usually can be fixed with what is known as the Miller Trust. The Miller Trust can be used to the advantage of both single and married applicants for Medicaid long-term care benefits.

The Miller Trust has confused many persons to the extent they sometimes think the Miller Trust will solve just about any Medicaid related problem. This is not so.

What the Miller Trust does is solve income-related problems. It pertains only to the income associated with the individual who is to be admitted to the nursing home and not the income of another, such as a community spouse.

With the Miller Trust, Medicaid will allow the applicant to shelter the income in a legally recognized income-diversion trust and through the use of the trust become income eligible for Medicaid benefits. The applicant is thereafter viewed by Medicaid as not having the income and, therefore, his income comes under the current $1,635-per-month cap.